The annual HMRC’s report including the latest R&D tax credits statistics offers important insights into the state of innovation within the UK economy.
Despite the challenges brought by the COVID-19 pandemic, the UK’s business landscape is showing remarkable resilience.
HMRC’s R&D tax credits statistics for the 2021-22 tax year show we are experiencing a remarkable resurgence in (R&D) spending.
In this article, we have pulled together the report’s key statistics.
Note: the figures released by HMRC are provisional and will be reviewed next year; we could therefore see the R&D tax credits statistics 2023 changes in future. We will endeavour to update this article when revisions become available.
R&D tax credits statistics: expenditure overview
It is estimated that £44.1 billion was spent on R&D, and £7.6 billion was claimed in R&D tax relief in the 2021-22 tax year – increases of 8% and 11% on the previous year, respectively.
These are promising statistics that indicate a resurgence in R&D spending in the UK following the COVID-19 pandemic, during which time some businesses slowed down or stopped innovative activities in order to scale back or focus on general business operations.
Of the total £7.6 billion of R&D tax relief claimed, £4.8 billion was awarded through the SME scheme, compared to £2.8 billion through the RDEC scheme.
Claims submitted
The 2021-22 tax year saw over 90,000 claims submitted – a 5% increase on the previous tax year – with a rise in claims across both the SME and RDEC schemes.
A further rise is registered in the average value of these claims that appears to be 6% higher than the previous year, and 9% higher if we consider only claims made through the SME scheme.
The average claim value has also increased, 6% higher than last year, and 9% for SME claims in isolation. Again, this could be another sign of recovery for many businesses and a change of strategy post-COVID.
First-time applicants
HMRC’s figures show that there was a 1% decrease in the overall number of first-time applicants in the tax year 2020-21 (18,945) compared to the previous year (19,140). This was the second consecutive decrease in the number of first-time applicants.
With only partial, provisional figures available for 2021-22, it is still too early to draw accurate conclusions on whether this is the start of a trend that will see first time claims decrease over the coming years.
Certainly, HMRC’s efforts to stop erroneous and fraudulent applications could have an impact on these numbers, as it’s assumable that many of these claims have now been stopped. Furthermore, the Mandatory Random Enquiry Programme run by HMRC to increase compliance could also be seen from some legitimate first claimants business owners as a barrier to access the relief, instead of an help to get their applications right and in line with the guidelines.
On the other hand, 2,705 first-time claims were submitted through the RDEC scheme for 2020-2021 – a 14% increase compared to the previous year. The increase in first-time claimants, confirms the trend that has seen this number constantly growing in recent years for RDEC.
SME scheme
According to HMRC’s figures, 79,205 SME claims were submitted for the 2021-22 tax year, with a slight increase of 1% compared to last year.
Specifically, 47.2% of SME claims were submitted purely for a deduction from Corporation Tax (CT)liability, while the remaining 52.8% included payable tax credit elements.
The numbers reinforce the central role that UK SMEs have when it comes to innovating and bringing groundbreaking ides on the market, particularly in specific sectors such as the computer programming one that alone accounts for 12,345 SMEs claims.
RDEC Scheme
Over 11,115 claims were submitted through the RDEC scheme in total: 42.2% of claims were submitted by large companies, who claimed £2.4 billion, while the remaining 57.8% of claims were submitted by SMEs, who claimed £415 million.
These SMEs will have undertaken the R&D activities as subcontractors or will have had their R&D spending subsidised, so will therefore have been unable to claim under the SME scheme.
While the RDEC scheme saw a smaller number of claims in comparison to the SME scheme, these claims are typically much larger in value than those submitted to the SME scheme.
Large companies accounted for 27% of claims exceeding £2 million, while the SME scheme saw 69% of claims valued under £50,000.
Number of R&D tax credit claims by cost band, 2021 to 2022
Claimant regions
HMRC’s data shows that 22% of all claims submitted and 32% of the amount (£) claimed in total was attributable to businesses with registered offices in London.
The second highest claimant area, the South East, accounted for 15% of total claims and 18% of the total amount claimed.
However, it is important to note that the registered offices may not be the same location where a business’s R&D activities are carried out, so this may not be an accurate representation of the saturation of innovative areas.
Claimant sectors
The top three sectors for claimant businesses are as follows:
- Information & Communication (23%)
- Manufacturing (23%)
- Professional, Scientific & Technical (16%)
While these three sectors combined make up 62% of total claims submitted and 67% of total relief provided, they are comprised of several SIC codes, posing the question of whether these percentages provide a full picture.
When taking a more granular look at the additional information released in this year’s R&D tax credits statistics, we can see that of the 16,210 applications submitted that fall under Information & Communication, for example, 12,345 relate to computer programming, consultancy, and related activities, which is 75% of the total.
Manufacturing, on the other hand, consists of a much wider range of sub-sectors or SIC codes. As a result, the five SIC codes with the highest number of applications make up 56% of the total. These are:
- Manufacture of fabricated metal products, except machinery and equipment (2,875 applications)
- Other manufacturing (2,580 applications)
- Manufacture of machinery and equipment n.e.c. (1,690 applications)
- Manufacture of computer, electronic and optical products (1,505 applications)
- Manufacture of food products (1,255 applications)
Amount of R&D tax credits claimed by industry sector, 2021 to 2022 (£ million)
Key takeaways
HMRC’s R&D tax credits statistics 2023 report offers important takeaways that help to understand the state of R&D investments in the country:
- An estimated £44.1 billion was spent on R&D, an increase of 8% on the previous year
- An estimated total of £7.6 billion was claimed in R&D tax relief, an increase of 11% on the previous year
- £4.8 billion was claimed through the SME scheme by 79,205 businesses
- £2.8 billion was claimed through the RDEC scheme by 4,695 large companies and 6,420 SMEs
- 37% of all claims submitted, and 50% of the total amount claimed (£) was attributable to businesses with registered offices in London and the South East
- 62% of total claims submitted and 67% of total relief were claimed by three sectors: Information & Communication, Manufacturing, and Professional, Scientific & Technical
Are you planning to submit your first R&D tax credit application?
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We’ll guide you through the process and take the application off your hands so you can focus on continuing your business’s journey to innovation.
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